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What to look for in Wells Fargo earnings

Bloomberg

Wells Fargo gears up to report on Tuesday

Wells Fargo & Co. will release its third-quarter earnings on Tuesday before the bell. The nation’s largest mortgage provider reported a 3.8% rise in net income in the second quarter, but revenue slipped 1.5% compared to the same period the year before.

The bank reported strong loan and deposit growth, but analysts were concerned about pressure on its net interest margin - a key metric that measures what the bank makes from lending and what it pays depositors.

This is what investors can expect:

Earnings: The San Francisco-based bank is expected to report third-quarter earnings of $1.02 a share, compared with 99 cents a share in the year-ago period, according to analysts surveyed by FactSet.

Revenue: The bank is expected to report a rise in revenue to $21.1 billion from $20.48 billion a year ago.

Stock reaction: Wells Fargo WFC, -0.87% shares are up 12% year-to-date and are 5% below their 52-week high of $53.80 a share. The shares have outperformed the Financial Select Sector SPDR Fund XLF, -0.89% , which tracks financial stocks in the S&P 500 SPX, -1.65% and is up 3.84% year-to-date.

Key issues: Wells Fargo’s CFO John Shrewsberry said in September that the bank expects mortgage originations to be in-line with the second quarter. But refinancing activity has slumped due to rising interest rates, and analysts are expecting Wells Fargo to address the slowdown by increasing exposure in other areas such as commercial real estate and consumer credit.

Separately, the bank plans to double the size of its asset management unit to $1 trillion in the next decade through more aggressive sales and acquisitions, according to reports.